Paul Collingwood v The Commissioners for HMRC

The burden of proof is on the Appellant to adduce reliable evidence that he has been overcharged, and the extent to which he has been overcharged. As explained by Moses LJ in Tower MCashback LLP 1 v HMRC [2010] STC 809 (‘Tower MCashback’), at [17] to [18], the taxpayer’s self-assessment constitutes the final determination of his liability, subject to three circumstances; namely (i) an amendment to the return; (ii) an enquiry by HMRC; or (iii) a discovery assessment. Section 50(6) TMA has the effect that a self-assessment shall “stand good” unless the Tribunal decides that the Appellant is overcharged by that self-assessment.

The standard of proof is the ordinary civil standard; that of a balance of probabilities.

The authorities to which we were specifically referred by the parties included:

The documents to which we were referred to were referred included the: (i) Hearing Bundle consisting of 248 pages (within which were the Notice of Appeal, the Further and Better Particulars and the Statement of Case dated 16 September 2022); (ii) Authorities Bundle consisting of 1314 pages; (iii) Appellant’s Skeleton Argument dated 8 May 2025; and (iv) Respondent’s Skeleton Argument dated 17 June 2024.

Having carefully considered the evidence given and the submissions made by both parties, we dismissed this appeal. We are grateful to both representatives for the submissions made (both oral and written). We are also grateful to the Appellant for his attendance and his engagement in these proceedings. Our findings and conclusions below are not to be interpreted to mean that the Appellant has engaged in any tax avoidance, but are a balanced appraisal of the legislation and its consequences.

In this Decision, the legislation and case law are cited so far as relevant to the issues in dispute.

On 7 May 2002, the Company was incorporated. The Appellant was the sole shareholder from 1 May 2003; as well as the sole director from 21 November 2005, until the Company was dissolved on 9 September 2020.

On 21 January 2005, the Appellant and the Company signed the Assignment Agreement.

On 2 October 2008, Adler Shine (“Adler”), the Appellant’s representatives, wrote HMRC and confirmed that income from “Dunlop Slazenger”, and other related income, was reported in the Company.

The Appellant entered into several sponsorship agreements.

On 25 October 2010, the Appellant entered into a sponsorship agreement with Slazengers (“the Slazengers Agreement”), whereby Slazengers provided him with cricketing equipment, and where he agreed to promote Slazengers’ brand and make use of the equipment provided. In consideration for the agreement, Slazengers would pay the sums earned by the Appellant to International Sports Management Limited (“ISM”) (“the Authorised Agent”). The specified contract period was 1 January 2011 and 31 December 2013. The Slazengers Agreement provided for “Sponsorship Payments”, which were defined as:

“such amounts payable to the Company on the occurrence of such events as specified in Schedule 1.”

‘Schedule 1’ provides that:

“1.1

Subject to paragraphs 1.2 and 1.3, the Company shall pay to the Player a retainer per Contract Year (“Retainer”) of £75,000.

1.2

If the player achieves a career aggregate of 5,000 Test runs of 5,000 One Day International (“ODI”) in the first Contract Year, the Retainer for Contract Years two and three shall be increased to £80,000.”

Additional performance-related payments were also set out in Schedule 1.

‘Clause 3.1’ and ‘Clause 3.2’ dealt with “payment and consideration”.

‘Clause 4.1’ provided for Sponsorship Payments on the basis that the Appellant undertook to wear, use, carry and promote bats and goods whenever training.

‘Clause 11’ dealt with the designation of the “Authorised Agent” for the purposes of invoicing and collecting amounts due in connection with the Agreement.

The Appellant entered into various PCA Ambassador Agreements with PCA. The substance of these agreements was recorded in letters addressed to the Appellant, personally.

On 20 December 2011, PCA entered into a PCA Ambassador Agreement with the Appellant, whereby the Appellant was engaged to undertake six PCA Ambassador appearances in 2012, at an agreed fee of £8,400. Payment would be made by a monthly bank transfer of £1,050, starting 20 May 2012; with a final payment on 20 December 2012, subject to the receipt of invoices. The fees were paid gross and required the Appellant to declare the sums on his self-assessment tax return.

On 22 January 2013, PCA entered into a PCA Ambassador Agreement with the Appellant, and confirmed that they would cover the cost of his Jaguar for its nine-month lease period, including insurance and any approved expenses. In return, the Appellant was required to take part in six PCA Ambassador appearances.

On 18 June 2014, PCA entered into another PCA Ambassador Agreement with the Appellant, confirming his appearances in 2014. Once again, PCA noted that the Appellant was required to undertake six PCA Ambassador appearances and, in return, he would receive a total fee of £6,000. Accommodation was to be booked and paid for by the PCA but all other expenses had to be agreed in advance.

Payment would be made by six bank transfers in the sum of £1,000. PCA would cover the cost of the Appellant’s “Loch Lomond” membership for 2014 to enable him to host the PCA’s trip to the club.

On 16 December 2014, PCA entered into a further PCA Ambassador Agreement with the Appellant, confirming his appearances for 2015. They noted that he was required to undertake six PCA Ambassador appearances and in return he would receive a total fee of £6,000. Accommodation was to be booked and paid for by the PCA but all other expenses had to be agreed in advance. The agreement also stated that PCA would cover the cost of the Appellant’s Loch Lomond membership for 2014 to enable him to host PCA’s trip to the club.

On 26 April 2012, a “2012 Sponsorship Agreement” was entered into between ISM, the Appellant and Clydesdale (“the Clydesdale Agreement”). The purpose of the agreement was for Clydesdale to sponsor cricket bats on an exclusive basis at all domestic and overseas matches at which the Appellant was selected to play. It commenced with effect from 26 April 2012.

‘Clause 4’ of the Clydesdale Agreement included a payment to International Sports Management Limited (“ISM”) (“the Authorised Agent”), in the sum of £68,000 per annum, in consideration for the Appellant undertaking to grant Clydesdale the sponsorship rights (i.e., rights granted to Clydesdale under Schedule 1 to the Clydesdale Agreement).

The relevant payment terms were set out at ‘Clause 4.3’.

‘Clause 9’ provided for the “non- assignability” of the Agreement.

On 19 June 2013, HMRC opened an enquiry, under s 9A TMA,into the Appellant’s 2011-12 tax return. Further enquiries were opened into the Appellant’s 2012-13, 2013-14 and 2015-16 tax returns, on 8 October 2014, 23 December 2015 and 21 December 2017, respectively. (Footnote: ²)

On 4 September 2013, the Appellant’s agent, Adler Shine (“Adler”) wrote to HMRC, as follows:

“Our client is the sole director and shareholder of the company, which is a Sports Image Management company dealing with the sporting image rights of our client. The company provides the services of our client for personal appearances, expert commentary and other promotional services and seeks also to promote and protect the name and image of our client.”

On 10 January 2014, Adler wrote to HMRC, as follows:

“... there is no formal agreement in place between our client and the company with regard to the assignment of his image rights.

...

The informal agreement between our client and his sports management agent is that our client pays 20% of all negotiated contracts and related incomes to his agent, such amounts being deducted from receipts before funds are credited to the company’s bank account.

Our client’s agent is International Sports Management (ISM) Ltd, [...]”

On 10 February 2017, Adler wrote to HMRC, as follows:

“Firstly I think it is important to clarify that Mr Collingwood has assigned the right of publicity to PDC Rights Ltd. The right of publicity is the right of a person to control the commercial value and exploitation of his or her name, voice or likeness. Because right-of-publicity laws promote artistic and commercial pursuits, they are included among intellectual property law. These laws are usually reserved for celebrities and other public figures whose name and image are important to their career. By allowing celebrities the right to control the commercial use of their name, voice and image, right-of-publicity laws protect the commercial potential of sportspersons.

The contracts referred to, [...] all related to publicity. Mr Collingwood has assigned his rights to income to PDC Rights Ltd. He, personally, has no legal right to benefit from such contracts. This right belongs to the company. Although these contracts are signed by Mr Collingwood and refer to Mr Collingwood personally he has effectively no personal entitlement to income from the contracts. The entitlement belongs to PDC Rights Ltd. I can see that HMRC are in possession of the Agreement for the Assignment of Intellectual Property rights which is between Mr Collingwood and PDC Rights Ltd.”

On 25 July 2017, Adler wrote to HMRC and confirmed that there was a previous enquiry in the Appellant’s tax affairs, which was closed to the HMRC’s satisfaction.

On 12 December 2019, HMRC issued Closure Notices for the 2011-12, 2012-13, 2013-14 and 2015-16 tax years. (Footnote: ³)

On 31 January 2020, HMRC issued their view of the matter letter.

On 31 July 2020, HMRC issued their review conclusion letter.

On 25 November 2020, the Appellant appealed to the First-tier Tribunal (‘FtT’).

In order to put the parties’ respective contentions into context, we start with the relevant statutory provisions. The relevant law, so far as is material to the issues in this appeal, is as follows:

“Income tax” is charged on income from any source that is not charged to income tax under, or as a result of, any other provision of ITTOIA or any other Act.

Section 5 provides that:

“5 Charge to tax on trade profits

Income tax is charged on the profits of a trade, profession or vocation.”

Section 8 provides that:

“8 Person liable

The person liable for any tax charged under this Chapter is the person receiving or entitled to the profits.”

Section 7 provides that:

“7 Income charged

(1)

Tax is charged under this Chapter on the full amount of the profits of the tax year [ (including amounts treated as profits of the tax year under section 23E(1))].”

Section 687 provides that:

“687 Charge to tax on income not otherwise charged

(1)

Income tax is charged under this Chapter on income from any source that is not charged to income tax under or as a result of any other provision of this Act or any other Act.

(2)

Subsection (1) does not apply to annual payments [ or to income falling within Chapter 2A of Part 4].

(3)

Subsection (1) does not apply to income that would be charged to income tax under or as a result of another provision but for an exemption.

(4)

The definition of “income” in section 878(1) does not apply for the purposes of this section.

(5)

For exemptions from the charge under this Chapter, see in particular–

section 768 (commercial occupation of woodlands), and section 779 (gains on commodity and financial futures).”

Section 689 provides that:

“689 Person liable

The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.”

HMRC have the power to open an enquiry into a taxpayer’s returns, pursuant to s 9A TMA. In relation to a “notice of enquiry”, s 9A TMA provides that:

“9A Notice of Enquiry

(1)

An officer of the Board may enquire into a return under section 8 or 8A of this Act if he gives notice of his intention to do so (“notice of enquiry”) –

(a)

To the person whose return it is (“the taxpayer”),

(b)

Within the time allowed.

(2)

The time allowed is –

(a)

If the return was delivered on or before the filing date, up to the end of the period of twelve months after the day on which the return was delivered.”

(b)

if the return was delivered after the filing date, up to and including the quarter day next following the first anniversary of the day on which the return was delivered;

(c)

if the return is amended under section 9ZA of this Act, up to and including the quarter day next following the first anniversary of the day on which the amendment was made.

For this purpose the quarter days are 31st January, 30th April, 31st July and 31st October.

(3)

A return which has been the subject of one notice of enquiry may not be the subject of another, except one given in consequence of an amendment (or another amendment) of the return under section 9ZA of this Act.

(4)

An enquiry extends to anything contained in the return, or required to be contained in the return, including any claim or election included in the return, subject to the following limitation.”

An enquiry is closed by the issuing of a closure notice by HMRC. In relation to a “closure notice”, ss 28A(1B) and (2) TMA provides that:

“28A Completion of enquiry into a personal or trustee return

(1)

This section applies in relation to an enquiry under section 9A(1) of this Act.

(1A) Any matter to which the enquiry relates is completed when an officer of Revenue and Customs informs the taxpayer by notice (a "partial closure notice") that the officer has completed his enquiries into that matter.

(1B) The enquiry is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “final closure notice”)-

(a)

In a case where no partial closure notice has been given, that the officer has completed his enquiries, or

(b)

In a case where one or more partial closure notices have been given, that the

officer has completed his remaining enquiries….”

The “right of appeal” is provided for at s 31 TMA and s 50(6) provides for the “grounds of appeal”.

The documents for the hearing, set out at para. 11 above, comprised of pleadings, documents relating to the Agreements, correspondence relating to HMRC’s enquiries and appeal correspondence. We heard evidence from the Appellant, which we considered to be of assistance to us in understanding the background and details. In his oral evidence, the Appellant accepted, as accurate, what was specified in the Agreements (which we will return to consider later).

Mr Carey’s submissions on “Issue 1” can be summarised as follows:

Mr Carey’s submissions on “Issue 2” can, briefly, be summarised as follows:

Mr Rosenbergsubmissions on “Issue 1” can be summarised as follows:

Mr Rosenberg’s submissions on “Issue 2” can also, briefly, be summarised as follows:

At the conclusion of the hearing, we reserved our decision, which we now give with reasons. We have considered any key points of disagreement in determining the facts as set out below

The background facts are not in issue between the parties. We, therefore, adopt the “Background Facts” at [14] to [33] above as the “Findings of Fact”. We also find that:

In respect of the ‘Slazenger Agreement’ and the ‘Clydesdale Agreement’:

In respect of the ‘PCA Ambassador Agreements’:

We further find that:

We, therefore, make these material finding of facts, As mentioned earlier, we will return to consider the terms of the Agreements in amplification of the Findings of Fact.

The Appellant appeals against Closure Notices issued pursuant to ss 28A(1B) and (2) TMA. The jurisdiction of the FtT is fixed and defined by the terms of the Closure Notices, as confirmed by the UT in Daarasp,at [25(7)]. In Shinelock, the UT considered that Daarasp had set out ten principles which could be drawn from the leading authorities in relation to the issue of “the matter in question” in a closure notice. Consistent with the decision of the UT in Shinelock,we adopt the summary of the essential workings of the enquiry and closure notice process set out in Daarasp:

“22.

An enquiry, begun by way of an enquiry notice, is concluded by a closure notice. The closure notice comprises two elements:

(1)

A statement of the officer’s conclusions; and

(2)

A statement of what, if anything, must be done to give effect to those conclusions.

23.

The whole point of tax returns and enquiries into them is to ensure that the public interest in taxpayers paying the correct amount of tax is met. To that end, HMRC must have an appropriate ability to examine the return, but the taxpayer must have a fair opportunity to challenge (by way of appeal) either (i) the conclusions of HMRC or (ii) the manner in which those conclusions have been given effect to (by way of amendments to the return). As can be seen from section 28A of the Taxes Management Act 1970, a closure notice quite clearly contains – and must contain – both elements; equally, as section 31(1)(b) of the same Act provides, an appeal lies against both “any conclusion stated” or any “amendment made”.

24.

It is important to appreciate that the conclusions of a closure notice are distinct from the amendments that may arise out of those conclusions. Obviously, there is a nexus between the two – the amendments implement the conclusions reached – but they are very different things. The conclusions in a closure notice consist of a statement why the taxpayer’s return is incorrect (if it is), whereas the amendments set out how the return must be corrected in order to give effect to those conclusions. A closure notice must state the officer’s conclusions; and having issued a closure notice, HMRC has no power to amend the relevant return other than to give effect to the conclusions: Bristol & West at [24]; Investec at [51].”

The UT decision in Fidex Ltd v HMRC [2015] STC 702 (‘Fidex’) was affirmed in the Court of Appeal in Fidex Ltd v HMRC [2016] STC 1920. At [45], Kitchin LJ set out the following principles:

“45.

In my judgment the principles to be applied are those set out by Henderson J as approved by and elaborated upon by the Supreme Court. So far as material to this appeal, they may be summarised in the following propositions: (i) The scope and subject matter of an appeal are defined by the conclusions stated in the closure notice and by the amendments required to give effect to those conclusions. (ii) What matters are the conclusions set out in the closure notice, not the process of reasoning by which HMRC reached those conclusions. (iii) The closure notice must be read in context in order properly to understand its meaning. (iv) Subject always to the requirements of fairness and proper case management, HMRC can advance new arguments before the FTT to support the conclusions set out in the closure notice.”

The Closure Notices issued to the Appellant in the appeal before us amended his self-assessment tax returns for the 2011-12, 2012-13, 2013-14 and 2015-16 tax years on the basis that the Appellant was liable to income tax as a result of the Payments made under the Agreements. The amount in issue is £196,187.09. There is no dispute about the quantum of the Closure Notices, save that the parties differ in view as to whether the Appellant is liable to income tax under the Agreements.

Section 5 ITTOIA charges to tax “profits” of a trade, profession or vocation. Section 989 of the Income Tax Act 2007 (“ITA 2007”) defines “trade” as “any venture in the nature of trade”. In Ransom, Lord Wilberforce said this:

“Trade” cannot be precisely defined, but certain characteristics can be identified which trade normally has. Equally some indicia can be found which prevent a profit from being regarded as the profit of a trade. Sometimes the question whether an activity is to be found to be a trade becomes a matter of degree, of frequency, of organisation, even of intention, and in such cases it is for the fact-finding body to decide on the evidence whether a line is passed. ... Trade involves, normally, the exchange of goods or of services for reward, not of all services, since some qualify as a profession or employment or vocation, but there must be something which the trade offers to provide by way of business. Trade, moreover, presupposes a customer (to this too there may be exceptions, but such is the norm), or ... trade must be bilateral—you must trade with someone. ... Then there are elements or characteristics which prevent a trade being found even though a profit has been made—the realisation of a capital asset, the isolated transaction (which may yet be a trade).”

The courts have frequently emphasised that “badges of trade”, may be important, but not necessarily decisive, and that the FtT must stand back and look at the whole picture: Marson (Inspector of Taxes) v Morton [1986] STC 463 at 471G.

In Hadlee v Commissioners for Inland Revenue [1993] AC 524, at 533, Lord Jauncey (in complete agreement with Richardson J) stated that:

“There is no justification in principle for differentiating between salary and wage earners and professionals whose income is the product of their personal exertion. In either case the person whose personal exertion earns the income derives the income.”

In Wing v O’Connell, the court was called on to consider whether a sum of money paid by way of “present” to the jockey after the conclusion of a race was chargeable to tax because it arose or accrued to him by reasons of him being a jockey. Kennedy CJ said this, at p 99:

“…it seems to me, however, reasonably clear that paragraph III…is intended to be divided into two parts, and the finding of fact is “the present of £400 referenced to in paragraph II of this amended case was an emolument which arose or accrued to the appellant by reason of his vocation as a jockey.”

And, at p 100, he said this:

“The special case finds that Mr Wing “earns his livelihood as a jockey” it was not questioned in argument that the earning of one’s livelihood as a jockey is a “vocation”.

The court found that it was subject to the charge to tax because it was paid:

“... in consideration of, professional work done and vocation services rendered in successfully steering the horse ... to victory, in other words for accomplishing the object of his professional engagement, and that it was in the nature of a bonus or voluntary addition to the prescribed fee under the regulation scale”

The boundaries of s 687 ITTOIA have been considered and a general approach to the question of whether a receipt is taxable have been identified: Kerrison v HMRC [2019] UKUT 8 (TCC) (Zacaroli J and Judge Brannan).For a receipt to be chargeable as miscellaneous income, it must:

Mr Carey submits that the Appellant is liable to income tax on the basis that he was the person ‘receiving’, or ‘entitled to receive’, the profits arising from the Agreements relating to his status and visibility as a cricketer”: s 5 and 8 ITTOIA. Mr Carey, alternatively, submits that the profits would be assessable pursuant to s 687 ITTOIA on the basis that the services performed by the Appellant were for an emolument not outwith the operation of s 687.

Mr Rosenberg, on the other hand, submits that the Appellant had no legal right to benefit from the Agreements because the Payments were made to the Company as a result of the Assignment Agreement. Whilst we acknowledge Mr Rosenberg’s submission that the Appellant’s case is not about image rights, we require to consider the Assignment Agreement and what was actually assigned under the Assignment Agreement.

The contractual arrangements agreed between the parties will usually provide the starting point and are likely to be conclusive, unless shown to be inconsistent with underlying economic and commercial realities. In Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, Lord Wright said this:

“… It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but on the contrary, the court should seek to apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat. That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except insofar as they are appropriate implications of law.”

Lord Hoffmann has authoritatively stated the modern approach to interpreting written contracts in Investors Compensation Scheme Ltd v West Bromwich Building Society, Investors Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society, Armitage v West Bromwich Building Society [1998] 1 All ER 98, at 114 to 115; [1998] 1 WLR 896, at 912–913, as follows:

“(1)

Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2)

The background was famously referred to by Lord Wilberforce as the “matrix of fact”, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)

The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4)

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see [Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] AC 749]).

(5)

The “rule” that words should be given their “natural and ordinary meaning” reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had ...”

It is clear from the above that a “subjective intent” between the parties is not sufficient. This would meet the “officious bystander” test.

It is not permissible to take into account the subsequent behaviour, or statements of the parties, as an aid to interpreting their written agreement: L Schuler AG v Wickman Machine Tool Sales Ltd [1973] 2 All ER 39, [1974] AC 235. The parol evidence rule has been part of the common law for over two centuries. This provides that where there is a written contract, oral evidence cannot be received to add to, subtract from, or vary the written terms. There are a number of exceptions to the parol evidence rule and these have increased in recent years. A discrete body of case law has developed concerning contracts in which the identity of parties is in controversy. Such cases constitute an exception to the parol evidence rule.

Extrinsic evidence may be admitted to establish the correct identity of a party: Fung Ping Shan v Tong Shun [1918] AC 403 at 406 to 407. In Hamid, Jackson LJ said this, at [57] to [58]:

“57.

In my view the principles which emerge from this line of authorities are the following. (i) Where an issue arises as to the identity of a party referred to in a deed or contract, extrinsic evidence is admissible to assist the resolution of that issue. (ii) In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible. (iii) If the extrinsic evidence establishes that a party has been misdescribed in the document, the court may correct that error as a matter of construction without any need for formal rectification. (iv) Where the issue is whether a party signed a document as principal or as agent for someone else, there is no automatic relaxation of the parol evidence rule. The person who signed is the contracting party unless (a) the document makes clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or (b) extrinsic evidence establishes that both parties knew he was signing as agent or company officer.

58.

In my fourth proposition the phrase ‘sufficiently identified’ is not a happy one. It is intended to include cases where there is an inconsequential misdescription of the entity on behalf of whom the individual was signing. This is exemplified by Badgerhill Properties Ltd v Cottrell.”

An agreement to agree is not an agreement at all as it does not constitute good consideration.

Having considered the Assignment Agreement in its entirety, we find that there is no evidence before us to support a finding that the Appellant had no legal right to benefit from the Agreements.

We give our reasons for so finding, before proceeding to consider the Agreements.

The Assignment Agreement, dated 21 January 2005, is set out in the following terms:

“AGREEMENT FOR THE ASSIGNMENT OF INTELLECTUAL PROPERTY

‘Clause 2’ describes how the Assignment Agreement was to work in practice, as follows:

“the payment of the sum of one pound (£1) by the Assignee to the Assignor, receipt and sufficiency of which the Assignor hereby acknowledges

the Assignor assigns to the Assignee, throughout the world, with full title guarantee, the entire right, title and interest, including without limitation, any copyright or similar rights, whether vested, contingent· or future, together with the right to secure, renew and extend such right title and/or interest in the Assignee's name (and/or the name of its licensees, successors and/or permitted assigns) and all other rights (now name of its licensees, successors and/or permitted assigns) and all other rights (now in known or which may hereafter come into existence) and to the JPRs, to hold the same unto the Assignee (and its licensees, successors and/or permitted assigns) absolutely for the whole period of the relevant IPRs for the time being capable of being assigned by the Assignor together with any and all renewals and extensions and thereafter (insofar as possible) in perpetuity.”

‘Clause 8’ of the Assignment Agreement provides that:

“8.

Neither party hereto shall be entitled to assign the whole or any part of their rights or obligations under this agreement without the other party’s prior written consent.”

And ‘Clause 10’ provides that:

“10.

No modification, amendment or waiver of this agreement or any provisions of it shall be binding upon either party unless confirmed in writing and signed by both of the parties.”

We are satisfied that the Assignment Agreement makes clear that the only thing that was assigned is the “intellectual property rights”. We are fortified in our view by the correspondence sent by Adler to HMRC (dated 20 June 2014 and 10 February 2017), which is set out in the following terms:

“We confirm that there is an informal ‘Assignment of Rights’ agreement between our client and the company with regard to his image rights and we will provide you with a copy shortly under separate cover.

…

“Firstly I think it is important to clarify that Mr Collingwood has assigned the right of publicity to PDC Rights Ltd….

The contracts referred to, [...] all related to publicity. Mr Collingwood has assigned his rights to income to PDC Rights Ltd…”

Accordingly, there is no assignment of anything that would prevent the Appellant from undertaking activities relating to promoting himself as a sportsman, and benefitting such activities personally. We further find that there is considerable force in Mr Carey’s submission that the closest thing that comes to image rights is Clause 1.1.12, as follows:

“1.1.12

rights to sue for passing-off past infringements, and rights of the same or similar effect or nature in any jurisdiction.”

We find force in Mr Carey’s submission that it is unclear in what way the Appellant relies on “image rights” having been assigned under the Assignment Agreement. It is further unclear how the Appellant says that impacts on the tax treatment of the Payments under the Agreements. There is no property in a person’s image and the tax treatment of the Payments requires an examination of the facts. (Footnote: ⁴) There is, however, nothing in the Assignment Agreement that would permit the Company to obtain the right to provide the Appellant’s services as a cricketer, or the associated activities (like appearances) which are intimately connected with his function as a professional cricketer.

We now proceed to consider the terms of the Agreements.

On 25 October 2010, the Appellant entered into (and signed in his personal capacity) a sponsorship agreement with Slazengers, whereby Slazengers provided him with cricketing equipment and he agreed, inter alia, to promote Slazengers’ brand and make use of the equipment provided. In consideration for the agreement, Slazengers would pay the sums earned by the Appellant to an Authorised Agent. The specified contract period was between 1 January 2011 and 31 December 2013.

The agreement is clearly stated to be:

“BETWEEN

(1)

SLAZENGERS LIMITED … (“the Company”)

(2)

PAUL COLLINGWOOD (“Player”) …International Sports Mangement …”

The agreement, materially, provided for “Sponsorship Payments”, which were defined as:

“such amounts payable by the Company on the occurrence of such events as specified in Schedule 1”

The “RECITALS”, Clauses and the Schedule all go on to refer to “the Player”, and not “the Company” or “the Authorised Agent”.

‘Schedule 1’ provides that:

“1.1

Subject to paragraphs 1.2 and 1.3, the Company shall pay to the Player a retainer per Contract Year (“Retainer”) of £75,000.

1.2

If the Player achieves a career aggregate of 5,000 Test runs or 5,000 One Day International (“ODI”) in the first Contract Year, the Retainer for Contract Years two and three shall be increased to £80,000.”

A variety of additional performance related payments were also set out in Schedule 1.

‘Clause 3’, which deals with “payment and consideration”, is set out in the following terms:

“PAYMENT AND CONSIDERATION

3.1

The Company [Slazenger Ltd] shall pay to the Authorised Agent (as per clause 11.1) during the Contract Period the Sponsorship Payments as earned by the Player.

3.2

Payments of the Retainer shall be made in two equal instalments…The Company shall pay the relevant Sponsorship Payment to the Authorised Agent within (30) days of receipt of the relevant invoice.

3.3

The Authorised Agent shall provide the Company on 1 July and 31 December in each Contract Year detailing any additional Sponsorship Payments which the Player has earned during the preceding six (6) months together with a valid VAT invoice for such amount. The Company shall be entitled to review such statement and the Player shall provide all reasonable assistance in replying to any queries the Company might have. Subject to the Company being satisfied that the statement is accurate the Company shall pay the relevant Sponsorship Payment to the Authorised Agent within thirty (30) days of receipt of the relevant invoice.”

‘Clause 4.1’ provides for Sponsorship Payments on the basis that the Appellant undertook, variously, to wear, use, carry and promote the bats and goods whenever training etc.

‘Clause 8’ provides that no party could assign its rights or obligations under the agreement without written consent of the other party save that the sponsor could assign to parent or subsidiary companies.

‘Clause 9.1’ provides that:

“Nothing in this Agreement shall be construed so as to imply that the Player is an employee of the Company.”

And ‘Clause 11’ provides that:

“11.1

The Player hereby designates the Authorised Agent as the Player’s authorised agent for the purpose of invoicing and collecting amounts due in connection with this Agreement. All notices, submissions or material for the Player’s approval to be made or delivered by the Company to the Player pursuant to this Agreement shall be delivered to the Authorised Agent at the said address free of all charges such as, for example, shipping charges and customs charges, marked for the attention of Neil Fairbrother. In the event that the Player becomes tax resident in an alternative country, the Player agrees to notify the Company of such change as soon as reasonably possible following such transfer.”

The Authorised Agent was, therefore, responsible for “invoicing” and “collecting” amounts. Having considered the Slazengers Agreement in its entirety, we find that the Appellant earned the Payments as “the Player” named in the agreement. Furthermore, the agreement is signed by the Appellant, personally, and not the Company or the Authorised Agent, and no party to the agreement could assign its rights or obligations without the written consent of the other.

PCA entered into various PCA Ambassador Agreements with the Appellant on 20 December 2011, 22 January 2013, 18 June 2014 and 16 December 2014. The Appellant submits that the PCA Ambassador Agreements all related to publicity and that he had assigned his rights to that income to the Company, and had no legal right to benefit from them. We have already found that the only thing that was assigned under the Assignment Agreement was intellectual property rights, and this is the starting point.

The letter, dated 20 December 2011, from PCA to the Appellant states that (in respect of the PCA Ambassador Agreement:

“…Further to our conversation, I would like to confirm the details of yourPCA Ambassador work…

You are engaged to undertake…”

We are satisfied that the PCA Ambassador Agreements related to the Appellant, in his personal capacity, and we find force in Mr Carey’s submission that this cannot be stated any clearer. There is, indeed, nothing in the letter that can be construed as being related to the Company.

On 26 April 2012, an agreement was entered into by the Appellant, ISM and Clydesdale. ISM is described as the Appellant’s “Authorised Agent”. This was, therefore, a tripartite agreement. The agreement is set out in, inter alia, the following terms:

“…

AMONG

(1)

INTERNATIONAL SPORTS MANAGEMENT LIMITED

(2)

PAUL COLLING WOOD (‘PC’)

(3)

CLYDESDAL BANK PLC

…

3.

Grant of Rights

…

3.2

PC warrants and undertakes to the Sponsor that:

…

3.2.2

he has not granted and undertakes not to grant to any third party other than the Sponsor the Sponsorship Rights in relation to each of the Events.”

By virtue of the above, the Appellant was warranting not to enter into any other agreement. The agreement is signed by the Appellant.

‘Clause 4’ is set out as follows:

“4.

Sponsorship Fees

4.1

In consideration of PC undertaking to grant to the Sponsor the Sponsorship Rights as described in this Agreement, the Sponsor agrees to pay to ISM the Sponsorship Fee of £68,000 (exclusive of VAT) per annum.”

The Clydesdale Agreement set out the relevant payment terms at ‘Clause 4.3’.

‘Clause 8.2’ and ‘Clause 8.3’ are set out in the following terms:

“8.

Relationships

…

8.2

ISM and PC shall be responsible for making all appropriate deductions for or payments of tax, national insurance and other contributions due and payable…

8.3

PC and ISM shall be responsible for the declaration of any Sponsorship Fees to any governing or regulatory body.”

This shows that ISM and the Appellant were responsible for tax deduction, and not the Company.

‘Clause 9’ provides for ‘non- assignability’, as follows:

“9.

Assignment

This Agreement is personal to PC, the Sponsor and ISM and none of PC, the Sponsor or ISM may assign, transfer or sub-licence any of their rights or obligations thereunder without the prior written consent of the other party.”

There is no evidence of any written consent to assign.

‘Schedule 1’ provides that:

The Sponsor shall be entitled to use PC’s name, image, biography, photograph…”

We observe that para. 1 of Schedule 1 does not sit well with the Assignment Agreement, and does not appear in the Assignment Agreement.

Having considered the Agreements in their entirety, we are satisfied that the reality in this appeal is that the Appellant was entitled to the Payments made to him under the Agreements, irrespective of the existence of the Company. We are further satisfied that the Agreements and Payments made thereunder were profits of the trade, profession or vocation. Each of the Agreements were between the Appellant and the various companies/entities. Equally, there is no suggestion in any of the Agreements that the Appellant was acting ‘on behalf of’ the Company. Therefore,even if money was paid to the Company (which has not been proven either by way of invoice or bank statement), the fact that money may have been redirected to the Company does not mean that the Appellant was not entitled to it and should not pay tax on it.

In the Court of Sessions Inner House in Murray Group Holdings Ltd & Orsv R & C Comrs [2016] STC 468 at [53], the court held that:

“...income derived from the personal exertions of the taxpayer is his income for tax purposes, even if it is paid to a third party. That principle must in our opinion apply to the concepts of emoluments and earnings for the purposes of income tax on employment income in the United Kingdom.”

Whether a person directly or indirectly receives the money, does not impact on whether they are ‘entitled’ to the money.

The Appellant does not suggest that the Company was a party to any of the Agreements that he entered into, but that the money that was paid pursuant to the agreements were paid to the Company. The Agreements were with the Appellant and required him to, personally, undertake the activities set out in the Agreements.The Appellant was the person receiving, or entitled to receive, the profits. The Agreements related to the Appellant’s status and visibility as a cricketer. It follows from the above analysis that the Appellant is liable to the charge to tax pursuant to s 5 ITTOIA. In the alternative, the profits are assessable on the basis that the services performed by the Appellant were for an emolument not outwith the operation of s 687 ITTOIA.

HMRC invite us to draw adverse inferences from the Appellant’s failure to call any evidence from witnesses involved in the preparation of the Agreements, or who has the ability to speak to how they worked in practice, in line with the ordinary principles for so doing. The relevant principles are set out in Lord Sumption’s speech in the Supreme Court in Prest, at [44].

In Wisniewski, Brooke LJ set out a number of principles on the issue of when it is appropriate, in the civil context, to draw adverse inferences from a party’s absence or silence. These principles are not to be confused with the situation where a party who bears the legal burden of proving something adduces sufficient evidence, so as to place an evidential burden on the other party. The invocation of the principles depends upon there being a prima facie case; but what this means will depend on the nature of the case the party in question has to meet.Having considered the authorities on the question, Brooke LJ set out the following principles, at p 340:

“From this line of authority I derive the following principles in the context of the present case:

(1)

In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2)

If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3)

There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4)

If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

Although Brooke LJ’s principle (3) does not refer to the need for there to be a prima facie case, that was the expression used by the court in McQueen v Great Western Railway Company (1875) L.R. 10; QB 569, which was one of the authorities considered by him in arriving at his five principles. Furthermore, in Wisniewski, Brooke LJ found that the plaintiff:

“had established a prima facie, if weak, case”.

Even where a prima facie case exists, it does not automatically follow that the failure of a person to give evidence will result in material weight being given to that failure, in favour of the other party: see Brooke LJ’s principle (4). As Hickinbottom LJ held more recently in R (Kuzmin) v GMC [2019] EWHC 2129 (Admin), there may be a reasonable explanation for the fact that the individual has not given evidence; and there may be other circumstances which would make it unfair to draw such an inference. Although Cockerill J in Magdeev v Tsvetkov [2020] EWHC 887 (Comm) (‘Magdeev’) expressed the court’s role in terms of its discretion, it is perhaps more a matter of the court having to apply the “rule” unless it is satisfied there is a reason not to do so.

In Wisniewski, at p 337, Brooke LJ began dealing with issue of adverse inferences by saying:

“…there is a line of authority which shows that if a party does not call a witness who is not known to be unavailable and/or who has no good reason for not attending, and if the other side has adduced some evidence on a relevant matter, then in the absence of that witness a judge is entitled to draw an inference adverse to that party and to find that matter proved.”

Thereafter, Brooke LJ cited McQueen v Great Western Railway Company (1875) LR 10 Q.B. 569, where Cockburn CJ had said this:

“If a prima facie case is made out, capable of being displaced, and if the party against whom it is established might by calling particular witnesses and producing particular evidence displace that prima facie case, and he omits to adduce that evidence, then the inference fairly arises, as a matter of inference for the jury and not a matter of legal presumption, that the absence of that evidence is to be accounted for by the fact that even if it were adduced, it would not displace the prima facie case. But that always presupposes that a prima facie case has been established; and unless we can see our way clearly to the conclusion that a prima facie case has been established, the omission to call witnesses who might have been called on the part of the defendant amounts to nothing.”

Brooke LJ then cited Chapman v Copeland (1996) 110 S.J. 569, where an inference was drawn against a defendant driver when he failed to give evidence. This was followed by British Railways Boardv Herrington [1972] AC 877 (Lord Diplock), where an inference was drawn against a defendant company for failing to call evidence.

Brooke LJ also cited Gillard J in O’Donnell v Reichard [1975] V.R. 916 (‘O’Donnell’) in the Supreme Court of Victoria Full Court (the equivalent jurisdiction to the England and Wales Court of Appeal):

“Looking at the authorities from Blatch v. Archer (1774) 1 Cowp. 63 right up to Earle v. Eastbourne District Community Hospital [1974] V.R. 722 , it may be accepted that the effect of a party failing to call a witness who would be expected to be available to such a party to give evidence for such party and who in the circumstances would have a close knowledge of the facts on a particular issue, would be to increase the weight of the proofs given on such issue by the other party and to reduce the value of the proofs on such issue given by the party failing to call the witness.”

Gillard J, himself, had said the following in O’Donnell:

“In Jones v Dunkel, (1959) 101 CLR at p. 320; [1959] ALR at p. 381; Windeyer, J, cited Wigmore on Evidence, 3rd. ed. (1940), vol. 2 s285, p. 162, which reads as follows: "The consciousness indicated by conduct may be, not an indefinite one affecting the weakness of the cause at large, but a specific one concerning the defects of a particular element in the cause. The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanations by circumstances which make some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted.”

Applying Wisniewski, the Court of Appeal in Jaffray v Society of Lloyds [2002] EWCA Civ 1101 said this, at [406] (per Waller LJ):

“It seems to us that on aspects where the evidence points in a direction against Lloyd’s in an area which could have been dealt with by Mr Randall the judge should have drawn an adverse inference from Lloyd’s failure to call Mr Randall to deal with it. This does not mean that any allegation that the names make against Mr Randall must be accepted because he did not give evidence. It simply means that where the evidence points in a certain direction an adverse inference can be drawn from a failure to call the witness to deal with it.”

The requirement that “the evidence points in a certain direction” is another way of saying that there needs to be a prima facie case.

In Magdeev, Cockerill J dealt with the matter thus:

“151.

… it was suggested for Mr Magdeev in reliance upon Jaffray v Society of Lloyd’s[2002] EWCA Civ 1101 that I was effectively bound to draw such inferences, at the risk of perpetrating a legal wrong.

152.

As I noted in the course of legal submissions, this line of argument neglects to take account of the recent Court of Appeal decision in Manzi v King’s College Hospital NHS Foundation Trust [2018] EWCA Civ 1882, where Sir Ernest Ryder SPT said:

“Wisniewski is not authority for the proposition that there is an obligation to draw an adverse inference where the four principles are engaged. As the first principle adequately makes plain, there is a discretion i.e. "the court is entitled [emphasis added] to draw adverse inferences”

153.

He also made clear that such matters as proportionality may give rise to a valid reason for a witness’s absence.

154.

In my judgment the point can be dealt with relatively briefly thus:

i)

This evidential “rule” is, as I have indicated above, a fairly narrow one. As I have noted previously ([2018] EWHC 1768 (Comm) at [115]), the drawing of such inferences is not something to be lightly undertaken.

ii)

Where a party relies on it, it is necessary for it to set out clearly (i) the point on which the inference is sought (ii) the reason why it is said that the “missing” witness would have material evidence to give on that issue and (iii) why it is said that the party seeking to have the inference drawn has itself adduced relevant evidence on that issue.

iii)

The Court then has a discretion and will exercise it not just in the light of those principles, but also in the light of:

a)

the overriding objective; and

b)

an understanding that it arises against the background of an evidential world which shifts - both as to burden and as to the development of the case - during trial.

iv)

In this case, save as to one very narrow issue with which I will deal at the appropriate point below, the exercise required of the parties relying on this principle has not really been done…”

The relevant principles were also set out in Lord Sumption’s speech in the Supreme Court in Prest, at [44], as follows:

“44.

In British Railways Board v Herrington [1972] AC 877, 930-931, Lord Diplock, dealing with the liability of a railway undertaking for injury suffered by trespassers on the line, said:

“The appellants, who are a public corporation, elected to call no witnesses, thus depriving the court of any positive evidence as to whether the condition of the fence and the adjacent terrain had been noticed by any particular servant of theirs or as to what he or any other of their servants either thought or did about it. This is a legitimate tactical move under our adversarial system of litigation. But a defendant who adopts it cannot complain if the court draws from the facts which have been disclosed all reasonable inferences as to what are the facts which the defendant has chosen to withhold. A court may take judicial notice that railway lines are regularly patrolled by linesmen and Bangers. In the absence of evidence to the contrary, it is entitled to infer that one or more of them in the course of several weeks noticed what was plain for all to see. Anyone of common sense would realise the danger that the state of the fence so close to the live rail created for little children coming to the meadow to play. As the appellants elected to call none of the persons who patrolled the line there is nothing to rebut the inference that they did not lack the common sense to realise the danger. A court is accordingly entitled to infer from the inaction of the appellants that one or more of their employees decided to allow the risk to continue of some child crossing the boundary and being injured or killed by the live rail rather than to incur the trivial trouble and expense of repairing the gap in the fence.”

The courts have tended to recoil from some of the fiercer parts of this statement, which appear to convert open-ended speculation into findings of fact. There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to rebut it. For my part I would adopt, with a modification which I shall come to, the more balanced view expressed by Lord Lowry with the support of the rest of the committee in R v Inland Revenue Commissioners, Ex p TC Coombs & Co [1991] 2 AC 283, 300:

“In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified.”

Cf. Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340.

Morgan J also summarised the principles from Brooke LJ’s judgment in Wisniewski in British Airways, at [141]. He then said this, at [142] to [143]:

“142.

This statement of principle is in accordance with the earlier decisions of the House of Lords in R v IRC ex p. T C Coombs & Co [1991] 2 AC 283 and Murray v DPP [1994] 1 WLR 1 and the comments of Lord Sumption in the Supreme Court in Prest v Prest [2013] 2 AC 415 at [44].

143.

These principles mean that before I draw an inference and made a finding of fact adverse to a witness who was not called, I need to ask myself:

- is there some evidence, however weak, to support the suggested inference or finding on the matter in issue?

- has the Defendant given a reason for the witness’s absence from the hearing?

- if a reason for the absence is given but it is not wholly satisfactory, is that reason “some credible explanation” so that the potentially detrimental effect of the absence of the witness is reduced or nullified?

- am I willing to draw an adverse inference in relation to the absent witness? - what inference should I draw?”

It is not open to HMRC to call the relevant witnesses. It is a basic principle that a party cannot call a witness simply to impugn his evidence. There is a relatively recent illustration of this principle in Kazahstan Kagazy PLC & Ors v Zhunus & Ors [2017] EWHC 3374 (Comm), per Picken J, at [57]:

“57.

… it is not open to a party to call a witness to give evidence which that party will say is not only wrong but deliberately so. In this respect, the following passage in the judgment of Mustill LJ (as he then was) in The ‘Filiatra Legacy’ [1991] 2 Lloyd’s Rep. 337 at page 361 explains the position:

“In one category are the situations where a party says that his own witness is giving mistaken albeit honest evidence and where he seeks to establish this either by calling direct evidence to contradict what his witness has said or by arguing that, when the evidence is regarded as a whole, a mistake is to be inferred. We believe that this is a common occurrence in civil litigation and unobjectionable in principle, provided that care is taken to avoid surprise and hence injustice. We adopt the reasoning of the British Columbia Court of Appeal in Cariboo v Carson Truck Lines 32 D.L.R. (2d) 36 (1961), and in the English cases there cited.

From this must be distinguished the situations where a party wishes to assert that the evidence given in chief by a witness whom he has called is not only wrong, but is wrong on purpose. The most obvious instance is one where the witness has turned coat and has deliberately failed to come up to proof. Here the position seems clear. The party cannot cross-examine his own witness by reference to his proof of evidence or other previous statement unless and until the court has ruled that he is hostile. Nor may he call evidence to establish the general bad character of his witness. (See Ewer v Ambrose (1825) 3 B. & C. 246; The Criminal Procedure Act, 1865, s.3, applied by the Civil Evidence Act, 1968) ...”

It follows that it does not matter for the purposes of an adverse inference that HMRC bear the burden of proof in this case. The issue is whether the party calls a ‘relevant’ witness. The authorities canvassed in Wisniewski make this abundantly clear.

We have also considered the circumstances in which a court or tribunal is entitled to determine a disputed issue of fact by resort to the burden of proof, as considered in Stephens v Cannon [2005] EWCA Civ 222. There, Wilson J (as he then was and with whom Auld and Arden LJJ agreed) held, at [46], that:

“46.

From these authorities I derive the following propositions:

(a)

The situation in which the court finds itself before it can despatch a disputed issue by resort to the burden of proof has to be exceptional.

(b)

Nevertheless the issue does not have to be of any particular type. A legitimate state of agnosticism can logically arise following enquiry into any type of disputed issue...

...

(d)

A court which resorts to the burden of proof must ensure that others can discern that it has striven to make a finding in relation to a disputed issue and can understand the reasons why it has concluded that it cannot do so. The parties must be able to discern the court's endeavour and to understand its reasons in order to be able to perceive why they have won and lost. An appellate court must also be able to do so because otherwise it will not be able to accept that the court below was in the exceptional situation of being entitled to resort to the burden of proof.

(e)

In a few cases the fact of the endeavour and the reasons for the conclusion will readily be inferred from the circumstances and so there will be no need for the court to demonstrate the endeavour and to explain the reasons in any detail in its judgment. In most cases, however, a more detailed demonstration and explanation in judgment will be necessary.”

These principles were refined in Verlander v Devon Waste Management & Anor [2007] EWCA Civ 835 (‘Verlander’) (Auld LJ with whom Rix and Moses LJJ agreed), at [24]:

“24.

When this court in Stephens v Cannon used the word "exceptional" as a seeming qualification for resort by a tribunal to the burden of proof, it meant no more than that such resort is only necessary where on the available evidence, conflicting and/or uncertain and/or falling short of proof, there is nothing left but to conclude that the claimant has not proved his case. The burden of proof remains part of our law and practice - and a respectable and useful part at that - where a tribunal cannot on the state of the evidence before it rationally decide one way or the other...”

Whilst HMRC bear the burden of proof in relation to the validity of the Closure Notices, the Appellant (who has the burden of proving that he has been overcharged by the Closure Notices) has not sought to call live witness evidence from anyone involved in the preparation of the Agreements, or the parties to the Agreements (including those familiar with how the Agreements were said to work in practice) in order to substantiate his case, in light of the terms of the Agreements. This is despite the obvious relevance of the evidence that any of those other individuals might give to the pleaded case. We find that there is considerable force in Mr Carey’s submission that there is a link missing between ISM (the Authorised Agent) and the Company, on the face of the Agreements which we have had the benefit of considering.

We have found that the Slazengers Agreement and the Clydesdale Agreement could not be assigned without the written agreement of the contracting parties. Furthermore, the Appellant has not adduced any evidence to show that there was any notification of assignment of the benefit under those agreements. It follows that any such assignment would be unlawful. In light of our analysis of the Agreements, and our conclusions about the parties to those Agreements, we hold that the Appellant is personally liable to pay income tax.

Accordingly, therefore, we dismiss the appeal in relation to Issue 1.

Whilst Mr Rosenberg initially submitted that HMRC’s analysis of the applicability of the legitimate expectation issue was correct, his oral submissions made explicit reference to the issue of whether there was a legitimate expectation in this appeal. Mr Carey consequently responded to these submissions. We have, therefore, dealt with this issue for completeness.

Mr Rosenberg submits that because HMRC had opened an earlier enquiry into sponsorship income from Dunlop Slazenger on 27 August 2008, and closed it on 15 April 2009, there was a legitimate expectation that HMRC accepted that sponsorship receipts should be assessed on the Company, rather than on the Appellant personally. He further submits that HMRC have approached different contracts inconsistently in that they have permitted no charge to tax for one contract, but taxed the other contracts which are “identical in all commercial and material respects”.

Mr Carey, on the other hand, submits that the FtT does not have jurisdiction to consider the legitimate expectation argument in the circumstances of this appeal, and that the Appellant ultimately seeks to take advantage of tax treatment from previous years. In this respect, he submits that HMRC cannot reconsider matters in a later tax year self-assessment return which are (allegedly) factually and legally the same as an earlier tax year self- assessment return, and which was the subject of a Notice of Enquiry.

We have considered the legislative context and the authorities in reaching our conclusions on the legitimate expectation issue.

The starting point is that the FtT is a creature of statute and its jurisdiction is wholly derived from statute. The FtT was created by s 3(1) of the Tribunals, Courts and Enforcement Act 2007 (“the TCEA”) for the purposes of “exercising the functions conferred on it by virtue of” the TCEA. This point was made clear by the House of Lords in C & E Comrs v J H Corbitt (Numismatists) Ltd [1981] AC 22 (‘J H Corbitt (Numismatists)’). The starting point is that appeal grounds which concern public law arguments should be pursued in judicial review proceedings, rather than before the FtT. In R & C Comrs v Hok [2013] STC 225 (‘Hok’), the UT said this, at [41]:

“41.

There is in our judgment no room for doubt that the First-tier Tribunal does not have any judicial review jurisdiction. That was made abundantly clear by the House of Lords in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1981] AC 22. That case related to the Value Added Tax Tribunals rather than the First-tier Tribunal, but they too were a creature of statute with no inherent jurisdiction, and the relevant principles are identical. Lord Lane (with whom the majority agreed) said, in what remains the classic statement on the point:

“Assume for the moment that the tribunal has the power to review the commissioners’ discretion. It could only properly do so if it were shown the commissioners had acted in a way which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight. If it had been intended to give a supervisory jurisdiction of that nature to the tribunal one would have expected clear words to that effect in the [Finance Act 1972]. But there are no such words to be found. Section 40(1) sets out nine specific headings under which an appeal may be brought and seems by inference to negative the existence of any general supervisory jurisdiction.”

The point was also made by Jacob J in C & E Comrs v National Westminster Bank plc [2003] STC 1072, where he adopted what had been said by Moses J in Marks & Spencer plc v C & E Comrs [1999] STC 205, at 247c, as follows:

“….in so far as the complaint is not focused upon the consequences of the statute but rather upon the conduct of the commissioners then it is clear that the tribunal had no jurisdiction. Its jurisdiction is limited to decisions of the commissioners and it has no jurisdiction in relation to supervision of their conduct.”

This principle was applied by Warren J in the UT in HMRC v Abdul Noor [2013] UKUT 71 (‘Noor’), at [28]. At [87], the UT said this:

“In our view, the FTT does not have jurisdiction to give effect to any legitimate expectation which Mr Noor may be able to establish in relation to any credit for input tax….In contrast, a person may claim a right based on legitimate expectation which goes behind his entitlement ascertained in accordance with the VAT legislation (in that sense); in such a case, the legitimate expectation is a matter for remedy by judicial review in the administrative court; the FTT has no jurisdiction to determine the disputed issue in the context of an appeal under s83.”

Consistently with Hok, the UT concluded that the FtT had no judicial review jurisdiction.

The FtT may have jurisdiction to consider appeal grounds based on public law arguments - such as legitimate expectation - depending on the statutory provisions under consideration. Thus, the statutory context is key. Whether or not there is jurisdiction in any case turns on the language of the relevant legislation, and the nature of HMRC’s act or discretion. Caerdav Ltd v HMRC [2023] UKUT 00179 (TCC) (‘Caerdav’) and Hoey v HMRC [2022] EWCA Civ 656 (‘Hoey’) provide some support for the proposition that the starting point is that appeal grounds concerning public law arguments should be pursued in judicial review proceedings - rather than in the Tribunal - unless the statutory context indicates otherwise.

In Hoey, at [132], the Court of Appeal held that:

“The question of jurisdiction can only be determined by reference to the particular statutory scheme in question that governs the tax tribunal’s jurisdiction.”

The Court of Appeal made clear, at [132], that the FtT cannot confer jurisdiction on itself, and that the parties cannot agree to confer jurisdiction on the FtT.

In The Executors of David Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) (Harrison), at [36], the UT indicated that it “overstates matters” to say that the FtT does not have the power “to consider public law arguments to the effect that HMRC have exercised discretion wrongly, with that strong presumption being rebutted only with clear words or necessary implication”. It is “simply a matter of statutory construction”.

In Alway, at [87], Judge Richards pointed out that the FtT’s jurisdiction had to be determined by reference to the statutory provisions governing the appellant’s appeal “as the FtT is a creature of statute with no inherent jurisdiction”. At [97], he said this:

“There is no material difference between the right of appeal set out in s31 of TMA 1970 … and that set out in s83(1)(c) of the Value Added Tax Act 1994. All the statutory provisions confer a right of appeal against specified HMRC decisions and none makes any reference to matters other than the statutory provisions dealing with the taxes concerned. If Parliament did not intend s83(1)(c) to give the Tribunal jurisdiction to consider matters other than a person’s right to credit under VAT legislation, I see no reason why Parliament could have intended it to consider, on an appeal under s31 of TMA 1970 … questions of … legitimate expectation which go beyond the relevant statutory provisions. If anything, the provisions of s50(6) and s50(7) of TMA 1970 make this even clearer in the context of this appeal than it was in the VAT appeal being considered in Noor, as those sections emphasise that the Tribunal’s focus should be on the amount of the assessments being made and leave no room for a consideration of whether considerations of legitimate expectation … prevent HMRC from making the assessments.”

In Houldsworth, Judge Anne Scott said this:

“74.

I have added emphasis because whether or not there is jurisdiction in any case turns on the language of the relevant legislation and the nature of HMRC's act or discretion; hence the conflicting arguments about discretion or the lack thereof.

…

79.

Many of the cases to which I was referred related to the statutory scheme in the VATA and not the TMA. Although it is a First-tier Tribunal decision, and therefore of persuasive authority only, Mr Randle relied on Judge Richards, as he then was, at paragraph 87 of Alway Sheet Metal [2017] UKFTT 198 (TC)(“ASM”). Judge Richards pointed out that the Tribunal's jurisdiction had to be determined by reference to the statutory provisions governing the appellant's appeal “as the Tribunal is a creature of statute with no inherent jurisdiction”. I agree and, in any event, that appeared to be common ground.

80.

However, I record the point to give context because Judge Richards went on to state that that where an appellant had appealed to HMRC in terms of section 31 TMA, the Tribunal's powers on an appeal thereafter are set out in section 50 TMA and he discussed section 50 TMA (see paragraphs 82 and 89 below).”

The appeal provision in this appeal (namely s 50 TMA) is not dissimilar to s 83(1)(c) VATA and relates to the amount of the amendment resulting from the conclusion in the Closure Notices. It is not a discretionary provision. Section 50 TMA was also a focus of attention in Aspin v Estill. Consequently, therefore, we find that any legitimate expectation argument is wholly without merit.

Even if a legitimate expectation argument were available in the circumstances of this appeal, in order to found a claim of legitimate expectation, a promise or representation relied upon must be “clear, unambiguous and devoid of relevant qualification”: see Bingham LJ in R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, 1569G (‘MFK’). We are satisfied that there is no such statement in this appeal, and the legitimate expectation argument would fall at the first hurdle. In further amplification of this conclusion, we are satisfied that whilst HMRC had opened an enquiry into income received pursuant to one of the Appellant’s sponsorship agreements in 2006-07, HMRC did not provide any view as to correctness of the income being reported through the Company, principally because the enquiry related to the amount of Dunlop Slazenger income received by the Company in the relevant year. During that enquiry, HMRC had not been provided with a copy of the relevant sponsorship agreement, or the purported assignment. Given that lack of information, HMRC did not need to comment on the appropriateness of reporting income through the Company, nor did they have sufficient information and/or documentation to form an opinion on the appropriate tax treatment of that income.

Accordingly, therefore, we are satisfied that the appeal must fail on Issue 2.

The collection and management powers of HMRC are to be found at s 1 TMA and s 5 of the Commissioners of Revenue & Customs Act 2005 (“CRCA”). The scope of those powers was described by Lord Hoffman in R v HMRC ex parte Wilkinson [2005] UKHL 30, at [20] to [21], as follows:

“[20] Section 1 of TMA gives them what Lord Diplock described in R v Inland Revenue Commissioners, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, 636, as

‘a wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, the highest net return that is practicable having regard to the staff available to them and the cost of collection.’

In R (on the application of Davies & Anor) v R & C Comrs [2011] STC 2249, the Supreme Court considered the discretion in HMRC’s duty of management. Lord Wilson said this, at [26]:

“The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: see s1 of the Taxes Management Act 1970. Inherent in the duty of the management is a wide discretion. Although the discretion is bounded by the primary duty (see R (on the application of Wilkinson) v IRC [2005] UKHL 30 at [21], [2006] STC 270 at [21], [2005] I WLR 1718 per Lord Hoffman…”

Having found that no legitimate expectation arises in the circumstances of this appeal (on a jurisdictional basis and on the facts), we further find that the legislation makes provision for the actions of HMRC in respect of the collection of taxes and management of the system relating to the collection of taxes.

Consequently, therefore, the appeal is dismissed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.